EXCEL CROP CARE LTDbreport.myiris.com/firstcall/WESCOAOX_20141126.pdf · Excel Crop Care Ltd 1181.40 13002.49 61.10 19.33 4.49 250.00 Atul Ltd 1350.15 40047.80 79.45 16.99 4.25 75.00

CMP 1181.40

Target Price 1311.00

ISIN: INE223G01017

NOVEMBER 26th

2014

EXCEL CROP CARE LTD

Result Update (PARENT BASIS): Q2 FY15

BUYBUYBUYBUY

Index Details

Stock Data

Sector Agrochemicals

BSE Code 532511

Face Value 5.00

52wk. High / Low (Rs.) 1231.40/301.90

Volume (2wk. Avg. Q.) 2399

Market Cap (Rs. in mn.) 13002.49

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 9656.01 11664.46 13939.03

EBITDA 1084.81 1422.59 1747.85

Net Profit 672.51 980.48 1215.43

EPS 61.10 89.09 110.43

P/E 19.33 13.26 10.70

Shareholding Pattern (%)

1 Year Comparative Graph

EXCEL CROP CARE LTD BSE SENSEX

SYNOPSIS

Excel Crop Care Ltd is engaged in the business of

agrochemicals comprising insecticides, weedicides,

fungicides, acaricides, fumigants and rodenticides.

Also includes soil and plant nutrition products, bio-

pesticides and plant growth promoters.

In Q2 FY15, Net profit jumps to Rs. 286.02 million

an increase of 23.05% y-o-y against Rs. 232.45

million in the corresponding quarter of previous

year.

The company’s net sales registered 9.93% increase

and stood at Rs. 2998.90 million in Q2 FY15 as

against Rs. 2728.00 million in Q2 FY14.

For 2nd quarter of FY15, Operating profit grew by

2.05% y-o-y and stood at Rs. 437.41 million as

compared to Rs. 428.63 million in the same period

Last year.

Profit before tax at Rs. 387.09 million in Q2 FY15

compared to Rs. 360.11 million in Q2 FY14,

registered a growth of 7.49% y-o-y.

The company has reported an EPS of Rs. 25.99 for

the 2nd quarter of current financial year as against

Rs. 21.22 in the corresponding quarter of the

previous year.

Net profit grew by 44.10% to Rs 617.77 million for

the end of H1 FY15 from Rs 428.71 million for the

end of H1 FY14.

Net Sales and PAT of the company are expected to

grow at a CAGR of 22% and 78% over 2013 to

2016E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Excel Crop Care Ltd 1181.40 13002.49 61.10 19.33 4.49 250.00

Atul Ltd 1350.15 40047.80 79.45 16.99 4.25 75.00

Dhanuka Agritech Ltd 575.85 28803.70 21.18 27.19 8.66 200.00

PI Industries Ltd 453.35 61916.80 14.69 30.86 9.06 200.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q2 FY15,

The company has achieved a turnover of Rs. 2998.90 million for the 2nd quarter of the financial year 2014-15 as

against Rs. 2728.00 million in the corresponding quarter of the previous year. EBITDA of Rs. 437.41 million in Q2

FY15. Net profit jumps to Rs. 286.02 million in Q2 FY15 against Rs. 232.45 million in the corresponding quarter

of the previous year. The company has reported an EPS of Rs. 25.99 for the 2nd quarter of current financial year

as against an EPS of Rs. 21.12 in the corresponding quarter of the previous year. The business of the company is

seasonal in nature and its performance depends on monsoon and other Climate Conditions.

Break up of Expenditure

During the quarter, total Expenditure rose by 12 per cent mainly on account of increased Employee benefits

Expenses 7% and Depreciation by 33% are the primary attribute for the growth of expenditure. Total

expenditure in Q2 FY15 stood to Rs. 2641.71 million as against Rs. 2348.43 million in Q2 FY14.

Break up of Expenditure

(Rs. In millions)

Q2 FY15 Q2 FY14

Cost of Materials Consumed 1467.62 1522.13

Depreciation 40.99 30.82

Employees Benefit Expenses 158.67 147.70

Other Expenditure 498.05 493.68

Purchase of Stock-in-Trade 70.84 156.11

Rs. In million SEP-14 SEP-13 % Change

Net Sales 2998.90 2728.00 9.93

PAT 286.02 232.45 23.05

EPS 25.99 21.12 23.05

EBITDA 437.41 428.63 2.05

COMPANY PROFILE

Excel Crop Care Limited was established in 2002, has risen out of the demerged portfolio of the agricultural

products segment of Excel Industries Limited. It has realized its pride of being the ‘supplier of choice’ by reaching

out to millions of farmers in more than 50 countries.

Excel Crop Care enables in providing proper solutions in soil health, seed treatment, crop protection, pest

management and also offers effective post-harvest treatment that has ensured smooth supply and trade in

agricultural commodities in many countries. The company extends solutions developed through backward

integration of technology.

Research and Development are approved by the Department of Technology of the Government of India and

acquired more than 15 patents. The company invests in developing new means and ways for guiding farmers to

nurture and protect crops, right from the sowing stage to the final storage in warehouses.

Brand Products

• Excel Acetecel

• Excel Mera71

• Excel Bipex

• Excel Merit

• Excel Plus

• Excel Lalkar

• Excel Pyromite

• Excel Sure shot

• Excel Pyromite

• Hexzol Gold

• Karilex

• Madhyam

• Metacel

• Metrex

• Mighty

• Mobilcel

• Excel Nutri S-90

• Phoscel

• Phosinetrocalcium

• Propinex

• Sarvada

• Seedcel

• Sugam

• Sulfex

• Super Glow

• Tercel

• Triblast

• Trizocel

• Acefex

• Azaoil

• Azacel-10000

• Celcorn

• Commando

• Celphos

• Crotocel

• Ct50

• DZire

• Emisan-6

• Enhancecel

Subsidiaries

• Excel Crop Care (Australia) Pty. Limited

• Excel Crop Care (Europe) N.V.

• ECCL Investments and Finance Limited

• Excel Genetics Limited

• Excel Crop Care (Africa) Limited

• Excel Brasil Agronegocious Ltd

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2013 -2016E

FY13A FY14A FY15E FY16E

I. EQUITY AND LIABILITIES:

A. Shareholders’ Funds

a) Share Capital 55.03 55.03 55.03 55.03

b) Reserves and Surplus 2328.09 2839.65 3535.36 4313.14

Sub-Total-Net worth 2383.12 2894.68 3590.39 4368.17

B. Deferred Government Grants 2.48 1.74 0.00 0.00

C. Non-Current Liabilities:

a) Long-term borrowings 177.28 85.97 58.46 46.77

b) Deferred Tax Liabilities [Net] 102.75 120.30 155.19 180.02

c) Other Long Term Liabilities 0.00 3.13 5.20 7.90

d) Long Term Provisions 81.13 115.20 140.54 161.63

Sub-Total-Long term liabilities 361.16 324.60 359.39 396.31

D. Current Liabilities:

a) Short-term borrowings 482.84 233.06 151.49 103.01

b) Trade Payables 1345.56 2267.87 2721.44 3129.66

c) Other Current Liabilities 260.62 298.84 331.71 364.88

d) Short Term Provisions 236.94 256.40 274.35 290.81

Sub-Total-Current Liabilities 2325.96 3056.17 3478.99 3888.37

TOTAL-EQUITY AND LIABILITIES (A+B+C+D) 5072.72 6277.19 7428.77 8652.85

II. ASSETS:

E. Non-Current Assets:

Fixed Assets

i. Tangible Assets 1273.83 1332.10 1385.38 1426.95

ii. Intangible Assets 11.66 31.53 49.82 70.74

iii. Capital work-in-progress 8.68 23.95 38.80 57.42

iv. Intangible Asset under Development 54.95 35.28 27.38 21.90

a) Total Fixed Assets 1349.12 1422.86 1501.38 1577.01

b) Non Current Investments 52.51 52.51 52.51 52.51

c) Long Term Loans and Advances 53.45 101.38 139.90 170.68

Sub-Total-Non-Current Assets 1455.08 1576.75 1693.79 1800.20

F. Current Assets:

a) Inventories 1515.09 2425.08 2691.84 3051.32

b) Trade Receivables 1418.44 1485.76 2392.07 3085.77

c) Cash and Bank Balances 202.89 110.43 90.55 99.61

d) Short Term Loans and Advances 380.92 549.88 409.25 441.98

e) Other Current Assets 100.30 129.29 151.27 173.96

Sub-Total-Current Assets 3617.64 4700.44 5734.98 6852.65

TOTAL-ASSETS (E+F) 5072.72 6277.19 7428.77 8652.85

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 7649.07 9656.01 11664.46 13939.03

Other Income 63.02 67.28 92.85 116.99

Total Income 7712.09 9723.29 11757.31 14056.02

Expenditure -7141.67 -8638.48 -10334.71 -12308.16

Operating Profit 570.42 1084.81 1422.59 1747.85

Interest -129.83 -47.13 -42.42 -45.81

Gross profit 440.59 1037.68 1380.18 1702.04

Depreciation -138.21 -137.07 -169.97 -195.46

Exceptional Items 0.00 64.75 116.55 153.85

Profit Before Tax 302.38 965.36 1326.76 1660.43

Tax -88.14 -292.85 -346.28 -444.99

Net Profit 214.24 672.51 980.48 1215.43

Equity capital 55.03 55.03 55.03 55.03

Reserves 2328.09 2839.65 3535.36 4313.14

Face value 5.00 5.00 5.00 5.00

EPS 19.47 61.10 89.09 110.43

Quarterly Profit & Loss Statement for the period of 31 MAR, 2014 to 31 DEC, 2014E

Value(Rs.in.mn) 31-Mar-14 30-Jun-14 30-Sep-14 31-Dec-14E

Description 3m 3m 3m 3m

Net sales 2220.93 3285.19 2998.90 2564.06

Other income 14.33 11.37 39.23 32.17

Total Income 2235.26 3296.56 3038.13 2596.23

Expenditure -2136.19 -2804.35 -2600.72 -2269.19

Operating profit 99.07 492.21 437.41 327.04

Interest -12.75 -11.37 -9.33 -7.93

Gross profit 86.32 480.84 428.08 319.10

Depreciation -35.41 -38.88 -40.99 -46.73

Exceptional Items 65.92 45.00 0.00 0.00

Profit Before Tax 116.83 486.96 387.09 272.38

Tax -10.30 -155.21 -101.07 -61.28

Net Profit 106.53 331.75 286.02 211.09

Equity capital 55.03 55.03 55.03 55.03

Face value 5.00 5.00 5.00 5.00

EPS 9.68 30.14 25.99 19.18

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 19.47 61.10 89.09 110.43

EBITDA Margin (%) 7.46 11.23 12.20 12.54

PBT Margin (%) 3.95 10.00 11.37 11.91

PAT Margin (%) 2.80 6.96 8.41 8.72

P/E Ratio (x) 60.69 19.33 13.26 10.70

ROE (%) 8.99 23.23 27.31 27.82

ROCE (%) 23.29 38.02 41.91 43.01

Debt Equity Ratio 0.28 0.11 0.06 0.03

EV/EBITDA (x) 23.60 12.18 9.22 7.47

Book Value (Rs.) 216.53 263.01 326.22 396.89

P/BV 5.46 4.49 3.62 2.98

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs. 1181.40, the stock P/E ratio is at 13.26 x FY15E and 10.70 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs. 89.09 and

Rs.110.43 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 78% over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 9.22 x for FY15E and 7.47 x for FY16E.

� Price to Book Value of the stock is expected to be at 3.62 x and 2.98 x respectively for FY15E and FY16E.

� We expect that the company surplus scenario is likely to continue for the next three years, will keep its

growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.1311.00 for Medium to Long term investment.

INDUSTRY OVERVIEW

The Indian agrochemicals industry is the fourth largest globally with estimates of its size going up to US $ 4

billion – almost 40-50% of production being exported. India has over 400 million acres of land under cultivation

and an estimated 60% of its population is largely dependent on agriculture directly and indirectly. It has only 2%

of the world’s land mass but supports 16% of the world population. India is one of the leading producers of food

grains and agriculture produce. It is among the world leaders in producing rice, wheat, cotton, fruits, vegetables,

sugarcane, tea, milk and spices. Food shortages, rising food prices, increasing food demand fuelled by increasing

population, stagnant land area under cultivation, growing concern for food security and the recently introduced

food security law in India underline the importance of food crop production Agrochemicals play an immensely

important role in farming and food security

The industry comprises of insecticides, weedicides, fungicides, plant growth promoters and regulators, fumigants

and rodenticides as the major product segments

The industry is highly competitive, dynamic and fragmented It operates both in the organized and unorganized

sectors

The industry comprises of diverse players ranging from small and medium ones dealing in generic molecules to

large multinationals with high-priced new generation and patented molecules..

The industry has players who manufacture only technical grade pesticides as well as those who are pure

formulators. It also has some balanced players who produce both - technical grade pesticides and their

formulations. Some players also manufacture intermediates for technical grade pesticides.

Among the agrochemicals, insecticides have dominated consumption pattern in India However, their share is

steadily declining over the years owing to a variety of reasons For the past few years consumption of weedicides

and fungicides is increasing Shortage and increasing cost of farm labour and the cost-effectiveness of chemical

weedicides in weed control is leading to increasing demand for weedicides. Growth of horticulture owing to

increasing demand for good quality fruits and vegetables and growing export of fruits and vegetables are giving

rise to higher demand for fungicides Of late, bio-pesticides are gaining popularity and their demand is increasing

owing to environmental safety, low toxicity, lower chance of resistance development and non-polluting

production process The Company has made foray in this area Cotton and rice account for over 50% of pesticides

consumption in India Wheat, soyabean, oilseeds, pulses, plantation crops, fruits and vegetables are the other

major consumers of agrochemicals Lately, owing to increasing awareness and better commodity prices, farmers

are showing willingness to try new, better quality and expensive pesticides The shift is towards low dosage,

more effective and better quality pesticides However, generic pesticides continue to be the mainstay of

pesticides usage

The fortunes of the agrochemicals industry are interwoven with those of agriculture. The relatively slow pace of

agricultural growth in India in the past few decades is reflected in the industry growth. Low manufacturing costs

and the ability and expertise in efficient handling of toxic and hazardous products and processes has made the

Indian industry one of the large exporters. India is the thirteenth largest exporter of agrochemicals in the world

The Indian industry has built large capacities much beyond the domestic needs. Exports account for almost 40-

50% of the industry production. Domestic market has been attracting multinationals due to good growth

opportunity. The domestic segment has been witness to a steady increase in market acceptance of new

generation and patented molecules

The agrochemical industry is highly regulated both domestically and internationally. The regulatory framework

poses entry barrier to various geographical markets and necessitates large investments in research, data

generation and product registration and involves long gestation from conceptualization to actual launch of a new

product The R & D costs for development of products and processes are high in the industry.

Supply of high quality products at competitive prices, development of new products and innovative formulations

and investment in research, data generation and product registration are emerging as key success factors.

Opportunities and Threats:

Agriculture is the mainstay of the Indian rural economy and supports over two-thirds of the country’s population

Agriculture continues to receive governmental support in the form of favourable agriculture policies, minimum

support price for major farm produce, subsidies, developmental programmes and schemes and availability of low

cost credit and finance through various schemes. With attractive minimum support/open market prices for

several crops, farmers can afford to spend on quality farm inputs.

Private sector also visualises good growth potential for investment in agriculture and agro-based businesses.

Rapidly developing food processing industry is helping in a large measure the growth of the farming sector

Steady growth of the rural economy is another factor attracting the private sector to rural areas in general and to

agriculture in particular

According to one industry estimate, India suffers about 30% crop losses owing to pests It is important to prevent

or reduce such losses Agrochemicals play a vital role in preservation of crops, growth of agriculture and

ensuring food security With the recent introduction of food security law in India, agriculture has come under

fresh focus This augurs well for agri input industries. With large food grain stocks being carried by the

government agencies and the food processing industry, the importance of and the demand for ‘post-harvest crop

protection chemicals’ is rising Several countries, including India, lose large foodgrain stocks owing to inefficient

food grain storage practices Post-harvest crop protection products like fumigants and rodenticides play a vital

role in food grain preservation This product segment has been showing good growth in the past several years

The Company is one of the few players in this business segment.

One expert estimate states that only 35-40% of the cultivated land in India is under crop protection Pesticides

consumption in

India is very low by the world consumption standards and offers scope for increasing it by educating farmers on

safe, appropriate and judicious use of agrochemicals. There is a need to bring awareness among the farmers

about optimal use of agro chemicals along with bio-pesticides, agrochemicals application techniques and the

pitfalls of over-dosages of agrochemicals with a view to achieve higher yields, better crop quality and desirable

cropping patterns and farming practices to ensure sustainability Changing cropping patterns and farm practices

also offer growth opportunity to the industry. Amongst the States also there are large disparities in per acre

pesticide consumption. Growing population points to growth of agri inputs including crop protection products

All these factors underline the growth potential for agrochemicals in the domestic market Genetically modified

(GM) cotton crop dominates the cotton acreage in India and new improved GM cotton varieties are being

introduced at regular intervals GM cotton has opened up opportunity for growth of weedicides and soil nutrition

products Similarly, increasing usage of hybrid and high value seeds is giving rise to demand for high quality and

high value agrochemicals Growth of horticulture, which is highly remunerative to the farmers, is also fuelling

growth of agrochemicals, especially fungicides and other high priced products

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – [email protected]

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